company's inventory turnover ratio
A company's sales equal $60,000 and cost of goods sold equals $20,000. Its beginning inventory was $1,600 and its ending inventory is $2,400. The company's inventory turnover ratio equals:
Inventory ratio indicates the number of times a company replaces its stock sold with the goods produced or brought. We can also say that it is a performance evaluation criteria of an entity that helps to know how efficiently an entity manages its inventory. The faster the goods are sold in an entity and replaced by new goods produced, the higher the inventory turn over ratio. Higher the ratio better the liquidity to the entity.
The formula for inventory turn over ratio is ( Cost of goods sold)/(Average inventory )
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